Strategic Management

Only available on StudyMode
  • Download(s) : 67
  • Published : March 6, 2013
Open Document
Text Preview
2/22/2013

The Value Chain

Strategic
Management

• Value Chain
– Value chain is a convenient way of looking at the firm’s activities

Introducing Strategy Management

– The functional activities within the firm that create value in the goods and services produced

(Basic Concepts of Strategic Management)

Lecture 3
21.2.2013

– Value chain: all the activities that a firm uses to design, produce, market, deliver, and support its product

Dr. Kayhan Tajeddini
Associate Professor (Docent)
Department of Business Administration,
School of Economics and Management

Lund University, Sweden
Kayhan.Tajeddini@ritz.edu

2013
Copyright ©2013 Pearson Education, Inc.
publishing as Prentice Hall

Components of the Value Chain
• Primary activities: physical actions of creating,
selling, and after-sale service of products
• Upstream: early activities in the value chain

1-1

3–2

Copyright © 2009 Cengage. All rights
reserved.

Business Functions, The Value Chain, and Value Creation

The Value Chain

– R&D
– Dealing with suppliers

• Downstream: later value chain activities
– Sales
– Dealing with distribution channels

Inputs

Research
and
Development

Outputs

Primary Activities

1

2/22/2013

Business Functions, The Value Chain, and Value Creation

The Value Chain

Inputs

Research
and
Development

Business Functions, The Value Chain, and Value Creation

The Value Chain

Production

Outputs

Inputs

Research
and
Development

Production

Marketing
and
Sales

Outputs

Primary Activities

Primary Activities

Business Functions, The Value Chain, and Value Creation

Business Functions, The Value Chain, and Value Creation

The Value Chain

The Value Chain
Company Infra-Structure

Support
Activities

Human Resources
Materials Management

Inputs

Research
and
Development

Production

Marketing
and
Sales

Primary Activities

Service

Outputs

Inputs

Research
and
Development

Production

Marketing
and
Sales

Service

Outputs

Primary Activities

2

2/22/2013

Components of the Value Chain (cont.)

Examples
of ValueCreating
Activities
Associated with
the
Differentiation
Strategy

• Support activities:
systems for human resources
management, organizational design and
control, and a firm’s basic technology

Source: Adapted from Porter, M. E. (1985). “Competitive advantage: Creating and sustaining superior performance”, New York, N Y: Free Press.

Components of the Value Chain (cont.)

• Utility of value chain:
helps determine internal cost
structure by assessing cost levels of
different activities

Components of the Value Chain (cont.)

• Benchmarked against
industry/competitors to know if
and where cost advantages or
disadvantages exist

3

2/22/2013

Outsourcing

Outsourcing

• Outsourcing: a deliberate decision
to have outsiders or strategic
allies perform certain activities in
the value chain

• About half of U.S. manufacturing jobs will be
outsourced to more than 28 emerging countries
over the next 10 years if current trends continue
• About 10% of U.S. service jobs may be
outsourced
• Popular and controversial way to correct internal
cost disadvantages

Outsourcing

Distinctive Competencies

• When should a multinational company outsource?
– Outsourcing makes sense if an outsider can perform a
value-chain task better or more cheaply
– However, outsourced tasks should not be crucial to the
MNC’s ability to achieve competitive advantage
– Value chain identifies areas in the input, throughput,
and output processes where MNCs can find sources of
low cost or differentiation advantages

• Strengths that allow companies to
outperform rivals
Ex.: Quality, innovation, customer service

• Companies must take advantage of
distinctive competencies in its value chain

4

2/22/2013

Distinctive Competencies, Resources,...
tracking img